Why does Kollywood lack financial transparency?

The Gautham Menon-Karthick Naren spat brings to fore the need for financial discipline in the film industry

April 04, 2018 12:42 pm | Updated April 06, 2018 01:17 pm IST

Last week, Kollywood’s biggest talking point was not the ongoing strike. Discussions were taken over by the war of words that erupted on Twitter between veteran director Gautham Menon and the younger Karthick Naren , who shot to fame with his debut Dhuruvangal 16. The ambiguous tweets between the two was over the funding of Karthick Naren’s new film Naragasooran , which was co-produced by Gautham Menon.

The gist of the controversy was that Karthick, fresh off the success of his first film, was asked by Gautham as producer to make his next film for his banner. Karthick says that everybody warned him not to tie up with Menon’s production house but he went ahead due to his “trust” in the director. But he soon realised that he was treated as “trash”. The allegation that Karthick made was that he and Badri Kasturi as co-producer spent more than half of the films budget from their pocket and finally ran out of money and could not pay stars like Arvind Swamy. He says Gautham, as a producer, did not bother to fund the film as promised.

More shocking as per Karthick revelation was that Gautham used his film as a collateral to generate finance for his other incomplete films – Vikram’s Dhruva Natchathiram and Dhanush’s Enai Noki Paayum Thota. And quoting Karthick’s tweets, Siddharth Rao, a co-producer of Selvaraghavan’s Nenjam Marappathillai alleged that Gautham Menon was the reason for the delay of his film too, which got censored almost a year back.

The ugly spat of words between Gautham Menon and Karthick Naren threw open the dirty underbelly of Kollywood financing. This is not the first time this is happening as small-time producers with potential hits have been trapped by bigger producers, hoping to raise funds for their incomplete films.

Money matters

Recently, a big-budget star film’s release had to be postponed at the last minute as the original producer had brought in a reputed production house as distributor. The production house, without the original producer’s knowledge, went and pledged the star film as surety, claiming they had brought over the distribution of the film. And with that money, they released their other big budget superstar film which became a hit. Later, the production house returned the rights to the producer saying they were not interested any longer in the project. Now the same production house, which has half a dozen films under various stages of completion, is on the lookout for a big director who can rope in a superstar to bail them out.

There is total lack of transparency in Tamil film financing which is still run by private financiers who charge anywhere between 36 to 48% interest. Banks have totally closed film financing due to a series of bad loans that had to be written off. Today, big stars in Tamil give dates only to directors who can give them a commercial hit, which has led to producers running after star directors, who have raised production cost through the roof. The director and star do not keep a tab on production cost and use the producer only as a tool to raise money from the market. And there are hundreds of producers mushrooming in the industry without knowing the financial intricacies of the game.

The Tamil film industry operates largely on borrowed funds with only a handful of producers investing their own money. The rest borrow money to the extent of 90 percent of the film’s budget at killing interest rates to produce their films. In this situation, if everything goes right, the film gets completed and released. However, in most cases, it does not. The film goes over budget or gets delayed and another film is started to raise funds to finish the first film. And in some cases, a big film under production is bought by paying a token amount to raise more capital.

If that film gets stuck, the money borrowed for the first film gets used for the second film. If that gets stuck, another film is commenced. On rotation basis, in this manner, funds are borrowed with the hope that first film shall get released. If the first film bombs and fails to recover the investment, all hell breaks loose. The second and subsequent projects also get stuck as the financial burden of all the films are intertwined and linked to each other. It is like a chain and even if one link breaks, it is chaos.

For a smooth run

Says producer G Dhananjayan, “Ideally, producers should not overstretch their financial limits and borrow money recklessly. They should borrow only based on a realistic revenue stream from theatricals, satellite, digital and overseas rights potential of the film. A good percentage of their investment should be on their own. To ensure there is a smooth run, producers must under estimate revenues and over estimate costs and plan their production accordingly. If they do, such mess ups can be avoided. Financial discipline is key in film business. Those banners which have this discipline survive and succeed while others struggle to float.”

Why is it that Bollywood ( Padmaavat, Baaghi 2 ) and Tollywood ( Rangasthalam ) are having a dream run at the box-office this year? It is not only content, but the way films are made by professional studios or production houses on a tight budget and limited borrowing at reasonable interest rates, and star/directors working on profit sharing. Unless Kollywood starts on a clean slate and bring about transparency in film production, more horror stories will unfold in future.

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